3 Serious Investment Hurdles and how to overcome them?

Ever seen a hurdle race?

Noticed how the athlete concentrates on overcoming the hurdles?

How they time their leap at the right moment to sail smoothly over them?

For these people the barrier is just a physical obstacle and not a mental one. It is the mind which has to be geared to overcome barriers and this dictum holds true for investors too.

Financial Hurdles: How Investors Can Leap Over Challenges to Success

It is often that investors behave in a manner which is just the opposite of what they should be doing in the first place. Instead of concentrating on facts they are driven by rumors. They chase the elusive winning stock and trip on the hurdle, losing money as a result. These mental hurdles which the investors encounter can be overcome by identifying and eliminating them by following some simple rules.

Table of Contents:

1. Hurdle 1: Emotional Imbalance

2. Hurdle 2: Lack of Knowledge

3. Hurdle 3: Myopic View

Hurdle 1: Emotional Imbalance

Emotion is a barrier which may look harmless and passive but it has the potential to wreck havoc and bruise the investor financially. ‘Buy low and sell high’ is a simple mantra which investors need to follow. They forget and instead often get afflicted by emotion, refusing to sell peaking stocks and ignoring potentially promising out-of-favor stocks. Holding on too long to losing stocks in the expectation that they will rise often never happens and financially the investor moves from a position of bad to worse.

Overcoming the Hurdle 1:

• Step I & II: Track Performance & Identify Weaknesses: Maintain records of your trades and analyze them objectively. This helps identify situations where emotions took control.
• Step III & V: Commit to Change & Master a Strategy: Acknowledge your emotional tendencies and commit to a disciplined approach. Choose an investment strategy you understand and stick to it.
• Step IV & VII: Accept Losses & Stay Objective: Losses are inevitable. Accept them as part of the process and learn from them. Don’t let emotions dictate your investment decisions.

Hurdle 2: Lack of Knowledge

The reluctance to understand the working of the investment market can cost the investor dearly. Everyone wants to back a winner but sometimes this can be a malady; especially when such a winning streak is not sustainable. Investors tend to back a stock which is currently strong without examining the reasons for its rise. This will inevitably lead to the stock’s downfall.

Overcoming the Hurdle 2:

• Step I & II: Track Performance & Identify Weaknesses: Analyze your past investments and identify areas where knowledge gaps led to mistakes.
• Step III, V & VI: Commit to Change, Master a Strategy & Weigh Alternatives: Commit to continuous learning. Choose an investment strategy that aligns with your risk tolerance and research different investment options. Evaluate their pros and cons before making decisions.
• Step VII: Adopt an Objective Approach: Base your decisions on research and sound analysis, not speculation or hearsay.

Hurdle 3: Myopic View

When the investor takes a myopic view, they lose the sight of the big picture. They may know that thinking long-term is the key to the success of their investment, yet they become drawn to the short-term movement of the stock and end up losing focus and money.

Overcoming the Hurdle 3:

• Step I & III: Track Performance & Commit to Change: Monitor your performance but don’t get fixated on daily movements. Remind yourself of your long-term goals and investment plan.
• Step II & IV: Identify Weaknesses & Accept Losses: Reflect on past instances where short-term thinking led to poor decisions. Learn to accept short-term losses as part of a long-term strategy.
• Step V & VI: Master a Strategy & Weigh Alternatives: Choose a long-term investment strategy and stick to it. This could involve diversification or dollar-cost averaging. Research and understand how different investments perform over time.

Killing the hurdles

Whatever the barrier or hurdle, it can be tackled and eliminated with a systematic and pragmatic approach.

Here are some useful steps which could turn investors to become agile and mentally fit hurdle runners:

I. Learn to monitor performances

‘Those who forget their history are condemned to repeat it’. Learn from mistakes and keep a track of your performances. A rational approach would be to document the market and sector trend, the exit target and the trailing stop. This record is a useful manuscript for identifying barriers and getting around them.

II. Identify the weak behavioral patterns and rectify them

Introspection is the right action which the investors need to undertake in order to find out their own behavioral weaknesses. Specifically, examining the past investing pattern will help pin-point the successful as well as the unsuccessful endeavors.

III. Stay committed to the changes necessary

What is to be changed is perhaps easier to identify than making the actual change. Bringing about a change in one’s behavioral pattern needs unwavering focus. A half-hearted attempt will not yield the desired result hence a temporary break from the investment routine is advisable to regain focus.

IV. Gear up adequately to deal with losses

Coming to terms with losses is a point of maturity in the investor behavior index. How to cope with losses which are a part and parcel of the process of investment is something which the investor has to learn. Accepting the loss and moving on will augur well for the overall investment process.

V. Gather experience and expertise in one investing strategy

The data available on different investment strategies are overwhelming and can often become intimidating for the investor. Under such circumstances it is always better to avoid trying to become a ‘jack of all trades’, rather mastering one investment strategy is a useful policy to follow. It may result in the loss of some investment opportunities but will help the investor to gain confidence in the chosen process.

VI. Learn to weigh alternative possibilities

Assessing the market, learning the subtle nuances and taking action accordingly will lead to an enhancement of the risk-reward evaluation process. Making a learned judgment based on the probabilities and market behavior will yield positive results.

VII. Adopt an objective approach

Often investors feel that the market will behave in a manner that they expect it to behave, however more often than not, it is not so and the market behaves on its own terms. Investors will be best served if they stick to an objective approach.

By implementing these steps consistently, you can equip yourself to overcome these common hurdles and make informed investment decisions that pave the way for long-term success.

Conclusion

A hurdle racer becomes a champion because he is disciplined and follows successful strategies. An investor too can be a winner by training himself to form and follow successful investment strategies.

To make all the successful investment principles and techniques work in your favor, you may test-drive our
If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘Book Now’ button below.